Cryptocurrencies stable as sell-off halted

Crypto markets were stable on Thursday, as last week’s sell-off was likely halted. Increased political stability in the US and easing geopolitical tensions restored risk sentiment somewhat.

A missile landing in Poland on Tuesday threatened to bring the Russia-Ukraine war to a wider area and triggered an emergency NATO meeting on Wednesday. NATO Secretary General Jens Stoltenberg stated after the conclusion of the meeting that the deadly missile likely came from Ukraine’s air defense system. NATO’s statement helped dissipate rumors that the errant missiles were an attack against Poland by Russia. Geopolitical tensions eased on Thursday, providing support for cryptocurrencies.

Uncertainty over the US mid-term elections and renewed lockdowns in China have added further pressure on crypto markets. The results of the elections were close, with the votes being tallied for a week. Republicans eventually wrested control of the House from the Democrats, winning the elections with a narrow majority and bringing a measure of political stability to markets. 

Bitcoin price was steady on Thursday, fluctuating around the $16,500 level. If BTC declines, support can be found at $15,000, while resistance may be encountered at $18,150 and higher up at the psychological level of $20,000. 

Ethereum price was mostly stable on Thursday, and also retreated, testing the support at $1,190 before paring some of its losses. If Ethereum's price declines, it may encounter support at $1,190 again and further down at the psychological level of $1,000, while if it increases, resistance may be encountered near the psychological level of $1,500 and further up at $1,660.

Souring risk sentiment hit crypto markets hard after the collapse of FTX last week. The FTX token faced liquidity issues, triggering a generalized crypto market sell-off. Last week, Changpeng Zhao, the CEO of Binance, stated that the exchange would acquire FTX and absorb its losses. It was later announced, however, that Binance backed off from the deal on reviewing FTX’s books and on reports that the US Justice Department would investigate FTX. On Friday, FTX CEO Sam Bankman-Fried resigned and the company declared bankruptcy. These recent developments have undermined confidence in the crypto industry, giving rise to concerns of a cascading crypto crisis.

Risk sentiment was somewhat boosted by cooling US inflation earlier in the week. The softer US PPI inflation print for October on Tuesday, combined with last week’s CPI report, showed that US inflation is cooling at a faster rate than expected. Reduced inflation is diminishing recession concerns, propping up risk assets.

Market expectations of future rate hikes were considerably trimmed after last week’s US inflation report and were further diminished after Tuesday’s inflation print. Reduced rate hike expectations diminish global recession concerns, boosting risk sentiment. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Rate hikes are expected to taper off in 2023 as the central bank moves into a stable interest rate.

BTC/USD 1h Chart

ETH/USD 1h Chart

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: